Spreading the wealth

The European Commission’s blueprint for the EU’s 2014-20 cohesion policy promises more effective use of EU budgetary funds, which it proposes to enforce with a more stringent ‘carrot-and-stick’ approach to handouts.

The proposal, presented by Johannes Hahn, the European commissioner for regional policy, last week (6 October), aims to “modernise” the bloc’s regional and structural aid policy by linking it to targets set out in the Europe 2020 strategy for jobs and growth. Hahn has set targets on employment, research spending, renewable energy and carbon emissions, education, and the fight against poverty.

Hahn said that giving priority to jobs and growth would ensure the continued relevance of the EU’s largest spending policy to all the EU’s regions. Under this approach, all 27 member states would still benefit from the multibillion euro policy, as well as supporting it.

Hahn hopes that the streamlined rules, tougher conditionality and increased controls will improve the impact of aid to EU regions, by reducing the number of mismanaged allocations, and by speeding up disbursements. A single regulation setting out common rules will replace the five current separate regulations governing the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF).

The Commission has proposed an allocation of €336 billion over the 2014-20 spending period, compared to €350bn in the current 2007-13 period. Close to half the proposed budget, €162.6bn, is earmarked for the EU’s less developed regions, with a population of 119 million people.

The Commission is proposing to spend €84bn on the ESF, to spur employment opportunities, promote lifelong learning, and help integrate communities such as the Roma. The proposed “Connecting Europe Facility” project, to promote transport, energy and digital links across the EU, will receive €40bn, and a further €10bn taken from national allocations under the cohesion fund – a move that has provoked criticism among member states reluctant to see their money diverted.

Punishing rule-breakers

Fact File

Changing jobs

Zoltán Kazatsay has been named as the next deputy director-general for employment, social affairs and inclusion from 1 December. He is currently deputy director-general in the Commission’s mobility and transport department.

He replaces Eleni Samuel, who was scheduled for retirement from the Commission on 1 December, but has agreed to stay on in the same department as a special adviser for an extra year, to help the Commission through the Cypriot presidency of the EU’s Council of Ministers in the second half of 2012. Samuel was a permanent secretary in the Cypriot ministry of labour and social insurance prior to being appointed a Commission deputy director-general in 2005.

The reform most likely to stir controversy between member states, MEPs and the Commission is a plan to link regional aid to the EU’s economic governance rules under its stability and growth pact. The Commission recommends suspending EU cohesion funds as one of the penalties for member states that violate the rules on budget deficit and debt. Germany and France have been promoting the idea for months.

Hahn’s own regional aid department opposed the plan within the Commission, but he eventually signed up to it. Now he defends it by arguing that failure by member states to adhere to strict fiscal rules undermines the effectiveness of regional aid – although he sees it as a measure of last resort only.

Some member states, many MEPs and Mercedes Bresso, the president of the Committee of the Regions, have sharply criticised the proposal. Bresso said freezing cohesion funds for rule-breakers would damage regions and member states already struggling under the economic crisis. “Withdrawing EU funding from an already ailing economy will only make matters worse,” she said.

Her comments were echoed by Danuta Hübner, a Polish centre-right MEP and the chair of the European Parliament’s regional development committee. Solidar, a social rights network, also warned that such an approach could increase poverty. Concerns were also expressed by the Czech Republic and Romania.

Simpler rules and less red tape

The Commission hopes that simplified application procedures will mean faster implementation of projects benefiting from cohesion funds. It also plans to reduce administrative burdens on funds created to help unemployed workers, such as the European Globalisation Adjustment Fund.

Encouraging more online submission of the masses of data related to funding is seen by the Commission as an important step in this direction.

A single set of rules is envisaged to cover the five main cohesion policy funds as well as the agricultural and fisheries aid funds.

Online data submission will become even more important in light of the complexities involved in operating with the three categories of funding for regions that the Commission is advocating.

A new transitional funding category is envisaged, for regions where gross domestic product (GDP) per capita is between 75% and 90% of the EUaverage.

This would stand alongside the existing two categories: less developed regions, where GDP is less than 75% of the EU average; and more developed regions, where GDP is higher than 90% of the EU average. This new system is intended to placate richer member states such as Spain and France, where the current system has phased their regions out of the largest shares of cohesion aid.

Regions in the new transitional category will be able to benefit from aid in meeting Europe 2020 targets on energy efficiency, innovation and competitiveness.

The ability of member states to absorb the billions of euros in aid is also addressed.

The Commission has recommended a temporary increase of 10% in the co-financing rate for countries most affected by the economic crisis and austerity measures – notably Greece.

The maximum co-financing rate for the least developed regions will remain 85%, while the rate for the new transitional category will be 60%, and 50% for the richest regions.

Hübner said the simplification plans were helpful, but warned that extra layers of benchmarks and controls introduced by the partnership contracts could generate problems for smaller member states with limited administrative abilities.

“We might end up with a more complicated system as a result,” she said.

National partnership contracts

The Commission wants to introduce “partnership contracts” with member states. These accords will set out how EU funds will be spent and where, so as to meet targets set under Europe 2020.

The contracts would be drawn up before the start of each financing period, and would be based on an assessment of development needs and national priorities for each member state. Member states would then have to hit performance benchmarks to qualify for the promised aid, as well as ensuring proper implementation of EU laws in areas where funding is sought. Failure to meet commitments could result in suspension or cancellation of funding, the Commission envisages.

Where targets are met or exceeded, member states would be entitled to tap into a “performance reserve” at the mid-term review of the cohesion policy. The reserve is foreseen as 5% of the cohesion policy budget.

Hahn said that the aim is to make sure that the Commission “is more involved” in shaping which projects will receive aid, and to oblige member states to take more political responsibility for proper spending of funds and for respecting Europe 2020 promises.

“We want to make sure the spending is effective, we want to set clear targets. That has not been achieved in the past,” said Hahn.

The contracts have been widely welcomed by MEPs, who have repeatedly pushed for tougher conditionality on funding.

“All attention is now on the poorest performers. We have to see if these contracts work,” said Lambert van Nistelrooij, a Dutch centre-right MEP, who is one of seven MEPs responsible for drafting the Parliament’s position on the package.